This Systematic Country Diagnostic (SCD)identifies the binding constraints to reducing extremepoverty and promoting shared prosperity in Ethiopia.Achieving those goals requires a two pronged strategy ofbuilding on the strengths of past performance as well asintroducing new elements. Progress in rural livelihoodsdrove poverty reduction in the past and will likely do so inthe future. In addition, faster, and more inclusive, privatesector-led structural change and ‘getting urbanizationright’ are essential going forward. The report identifiestwo key challenges to sustainable progress: Ethiopia needssustainably financed infrastructure that enables privateinvestment to flourish and reduces reliance on publicborrowing. It must also strengthen feedback mechanisms thatinform policymakers of what works and what doesn’t so thatthe aspirations of a rapidly rising and better-educatedworking-age population can be met. The report is structuredin two parts: Part A analyses the past and Part B identifiespriorities for the future.